Thu January 31, 2013
Study: Poor Pay More Of Their Income In Taxes
A new national study says poor people in Wisconsin, as in most states, devote a larger share of their incomes to taxes than do wealthier residents. The study's author says an income tax cut being weighed by Republicans would exacerbate that trend.
The study by the Institute on Taxation and Economic Policy (nationwide results, Wisconsin results) found that when income, sales, property and excise taxes are all considered, the bottom fifth of Wisconsin income earners pay about 9.5 percent of their income in taxes. By comparison, the study found the top 1 percent pay less than 7 percent of their income in taxes.
Institute Director Matt Gardner says that disparity will only grow if Republicans follow through on a promise to cut the income tax. “What Wisconsin lawmakers are currently contemplating would take the state in exactly the opposite direction. It would take an already unfair tax system and make it more so.”
Republicans have said they want to target their income tax cut to people who make more than $20,000, since people who earn less than that already pay comparatively lower income taxes than in other states. But Gardner says that ignores the rest of the taxes they pay, particularly the sales tax, which is much more regressive. “You simply can't look at the state personal income tax in isolation and say anything meaningful about how the Wisconsin tax system affects low-income families.”
Gardner says one tool to close the disparity in who pays taxes is through the Earned Income Tax credit for lower income families. The credit is refundable and comparatively robust in Wisconsin, but it was scaled back last session by GOP lawmakers.